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New Brazil Federal Decree Rules Environmental Licensing

5 May 2015

Tauil & Chequer Legal Update

Complementary Law N. 140/2011 (LC N. 140/2011) was a milestone in the Brazilian legal framework, as it provided for the cooperation of federative agencies in the administrative actions related to the constitutional provision of environmental protection. One of the big highlights of LC N.140/2011 was the definition of criteria for cooperation between federative agencies, especially in the environmental licensing.

The LC N. 140/2011 empowers the municipal authority to license local environmental impact activities as to be defined by the States Environmental Councils plus activities located in protected areas established by the municipality (except for Area of Environmental Protection).

The State agencies are empowered to license activities performed within protected areas as established by the State (except for Area of Environmental Protection). Moreover, the state environmental licensing is residual, in other words, the states agencies have authority to license the activities that fall not within the competence neither of the Union nor of the municipality.

The Union is entitled under LC N. 140/2011, article 7 (XIV) (h) stresses that the federal agency (IBAMA) has authority to license activities under the "typology established by the Executive Branch". This regulation of such typology was delayed by far more than three years, by the Federal Decree N. 8,437, published on April 23, 2015.

The Federal Decree No. 8,437/2015 established a significant centralization of federal environmental licensing, especially considering that many activities that were licensed by state agencies will be now licensed by the federal agency. It was established that roads, railways and federal waterways will be licensed by IBAMA, as well as the generation systems and electric power transmission (hydroelectric plants with an installed capacity equal or less than three hundred megawatt, thermal power plants with installed capacity equal or less than three hundred megawatt, and wind power plants, in the case of projects and offshore activities and land-sea transition zone).

In a preliminary analysis, it seems that the criteria used to fix the rules of competence (the breadth of the environmental impact) was turned down in favor of property rights the criteria. However, it is early to reach a final conclusion on the matter.

Additionally, IBAMA has authority to license organized ports with port facilities, which move loads in a volume exceeding 450,000 TEU / year or 15 million tons / year; the private use terminals and port facilities, which move loads in a volume exceeding 450,000 TEU / year or 15 million ton / year. The criteria adopted is the extent of activities plus the Union vested rights as a concessionaire or authorizing party.

Regarding the Oil & Gas industry, IBAMA is entitled to license the exploration activities, as follows:

exploration and evaluation of deposits, including the seismic acquisition activities, piston core, well drilling and long-term testing when performed in the marine environment and land-sea transition zone (offshore);

production, including drilling activities of wells, implementation of production and distribution systems, when performed in the marine environment and land-sea transition zone (offshore); and

production, when made from unconventional resource of oil and natural gas in the marine environment and land-sea transition zone (offshore) or land (onshore), including drilling activities of wells, hydraulic fracturing and implementation of production and distribution systems.

It is noteworthy that the environmental licensing and authorization proceedings of activities and projects listed in the typology that were started on a prior date to the publication of the Decree will have their proceedings held before the originated agency until the end of the validity of the operating license. However, its renewal will be up to the federal agency. It is possible to predict complex issues regarding the application of the transitional rule, since the certification of compliance with conditions of the environmental license, it is always a difficult matter.

If the request for operating license renewal has been filed before the originated environmental agency on a prior date to the publication of the Decree, the renewal will be up to that agency. However, the later applications for renewal will be made before the federal environmental agency.

It is feasible to conclude that the Decree N. 8,437/2015 substantially preempts the authority of states agencies related to the environmental licensing proceedings of several activities. It is worth noting that IBAMA got more powers but was not provided with neither an equivalent increase of budget nor of structure. So it is quite likely that environmental licensing before IBAMA will slow down, as a means to avert undesirable delays there is the possibility of inter federative agreements in order to delegate the licensing of certain activities and projects. The point is that this can be considered an alternative more political than legal.

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